2013 (11) TMI 831 - AT - Income Tax

Block assessment - Penalty u/s 158BFA(2) of the Act Undisclosed income - Entries made in the peace of paper separate from the regular books of accounts Held that - If the time limit for filing return of income has not expired, then the income from the transactions entered in the books of account or any other documents maintained in the regular course of business has to be excluded from the computation of income. In this case, what was found during the course of search operation is the amount shown as receivables. Though the assessee claims that this is the document maintained in the regular course of business, this Tribunal is of the considered opinion that the amount shown as receivables in a piece of paper cannot be treated as books of account maintained in the regular course of business in the absence of a corresponding entry in respect of the credit sales in the books of account maintained in the regular course of business. What was recorded in a piece of paper as amount receivable has to be treated as turnover outside the books of account. Therefore, this Tribunal is unable to accept the contentions of the assessee that the seized document which discloses the amount receivables on credit sale has to be treated as document maintained in the regular course of business Decided against the Assessee. However, penalty reduced from 200% to 100%. - Decided partly in favor of assessee.

Summary

Issues:
1. Assessment of concealed income under section 158BFA(2) of the Act.
2. Treatment of amount receivable on credit sales as undisclosed income.
3. Relevance of assessment proceedings in penalty proceedings.
4. Discretionary levy of penalty under section 158BFA(2).

Analysis:
1. The appeal was against the order confirming penalty under section 158BFA(2) of the Act for concealed income. The assessing officer found an amount receivable on credit sales as concealed income and levied penalty. The representative argued that the assessee did not admit it as undisclosed income but as regular income. The Tribunal did not accept this argument, stating the assessee did not object to the assessment as undisclosed income.

2. The representative contended that the amount shown as receivables was not undisclosed income as it was recorded in the regular course of business. However, the Tribunal disagreed, stating that without corresponding entries in the books of account for credit sales, the amount shown as receivables had to be treated as undisclosed income. The Tribunal upheld the penalty levy.

3. The representative argued that assessment and penalty proceedings are separate, requiring reevaluation of the material. The Tribunal held that the seized document showing receivables could not be considered part of regular business records without corresponding entries. The Tribunal found the penalty rightly levied and modified it to 100% from 200% for justice.

4. The assessing officer had discretion to levy penalty at 100% to 300%. The Tribunal considered 100% penalty appropriate in this case, modifying the penalty order accordingly. The appeal was partly allowed, and the penalty was reduced to 100% of the tax leviable.

In conclusion, the Tribunal upheld the penalty under section 158BFA(2) based on the treatment of the amount receivable on credit sales as undisclosed income due to lack of corresponding entries in the books of account. The penalty was reduced to 100% from 200% for fairness in the circumstances of the case.